The 26-County coalition government of Brian Cowen is in crisis over a
‘golden circle’ of wealthy Irish developers who received almost half a
billion Euro to purchase shares in a potentially fraudulent transaction
at the scandal-plagued Anglo-Irish Bank.

The transaction, which is likely to cost the taxpayer 451 million Euro,
has created huge political controversy for the coalition government,
which is under pressure to name those involved.

The loans were issued in July on the extraordinary basis that the money
would be used to buy shares of Anglo-Irish Bank itself, which were
collapsing in value at the time. The shares served as the only
collateral required for the loans.

The apparent plan was to artifically support the bank’s share price,
while rewarding ‘circle’ participants with a one-way gamble: if the
bank failed, the debts would be written off.

A further 15 per cent stake in the bank bought by the family of Cavan
billionaire Sean Quinn was also financed using the bank’s own money.
This means that over a quarter of the bank’s shares were purchased in
private deals last July, using the bank’s own money.

The Dublin government stands accused of complicity, seen in the bank’s
subsequent nationalisation and its continuing refusal to name the ten
people involved. They are believed to be major customers of the bank
and include prominent Fianna Fail supporters.

Brian Cowen is also known to have been closely involved in the banks’s
activities. Last year, Cowen dined privately with directors of the
bank at a Dublin hotel after he had been warned of a dangerous position
with the bank’s shares that threatened the entire Irish financial
system.

The collapse in the bank’s share price risked triggering a mountain of
share selling, largely a result of trading by Sean Quinn in high-risk,
leveraged contracts known as ‘contracts for difference’. Trading in the
CFDs is a form of spread-betting on the bank’s share price.

Anglo-Irish Bank’s collapse became inevitable last month following
revelations that its financial statements were manipulated to disguise
the scale of the bank’s balance-sheet problems and shore up its stock
price.

The scandal began over the issue of irregular loans by the bank to its
directors, which continues to rumble on. It led to the resignations of
Anglo’s chairman, Sean Fitzpatrick, and chief executive, David Drumm,
in December. In a statement today [Friday], the bank said it was
unlikely to recoup the loans, which total 255 million Euro.

The scandal has also placed the move by the Minister for Finance Brian
Lenihan to guarantee deposits in the state’s banks last September 30 --
the final day of Anglo’s financial year -- in the context of a
desperate attempt to cover up Anglo’s misdeeds and malpractice.

More generally, it has threatened to collapse the state’s entire
banking system at a time of a profound global economic recession.

RESIGNATIONS

In the wider meltdown in the Irish banking sector, this past week has
seen three further resignation announcements, most notably that of
Peter Fitzpatrick, finance director of Ireland’s third biggest
financial services group Irish Life & Permanent.

His departure arose from the disclosure last week that the bank had put
billions of Euro temporarily on deposit at Anglo Irish Bank in time for
September 30. Fitzpatrick said he “apologised unreservedly” for
“mistakes”, but it is still unclear what trajectory the funds passed
through.

Meanwhile, the chairman of Irish Nationwide Building Society, Michael
Walsh, suddenly bolted from his position on Tuesday, declaring the
institution “cannot survive” without significant government support and
reorganisation.

And it was also announced that Bank of Ireland chief Brian Goggin, who
infuriated the public last week when he complained that his disclosed
compensation had fallen below two million Euros per annum, will quit
his post within three weeks.

Public anger at Ireland’s wealthy nexus of bankers, developers and
politicians, who profited most from Ireland’s recent boom and are seen
to have contributed most to its downturn, is fuelling protests and
demonstrations. Most cutbacks, pay cuts and redundancies introduced in
recent months have been directed at average or low-paid workers, or
those in receipt of social welfare.

Fianna Fail strategy in both the banking and the broader economic
crisis appears focused on keeping property valuations high at all
costs, partly to bolster over-leveraged developers, but also to hold
back a potential avalanche of property selling and foreclosures.

The party’s coalition partners in the Green Party are coming under
immense pressure to abandon their support for the hated Cowen
administration. The Greens, who issued another warning that they could
pull out of government, were dramatically told on Wednesday night to
“put up or shut up”.

Fine Gael’s Phil Hogan made the charge after the Green Party’s chairman
Senator Dan Boyle said his party could end its alliance with Fianna
Fail if its politicians are implicated in the ‘golden circle’ scandal.

“Soon it will be time to put up or shut up. It’s time for them to
decide whether they want to be part of Government decisions that
collude with the status quo and conceal information arising from the
banking scandals stretching back to September 2008,” said Mr Hogan.

CALL FOR ACTION

Sinn Féin President Gerry Adams warned that the ‘golden circle’ of the
1980s associated with former Taoiseach Charles Haughey was “alive and
well” in Irish politics.

Speaking from Kerry, where he was meeting with community and resident
organisations and local businesses, Mr Adams said the government’s
failure to deal with the banking crisis had linked Ireland to
corruption and damaged its reputation internationally.

“Once again it is the actions of bankers, property developers and inept
Ministers that has almost brought this country to its knees,” he said.

Mr Adams said the admission by Minister Lenihan that he didn’t fully
read a report on the state of Anglo-Irish Bank prior to its
nationalisation was “intolerable”.

“Finance Minister Brian Lenihan should be removed and this government
should resign from office,” he said.

“The details that have emerged over the last number of days about the
book-cooking of Anglo-Irish Bank and Irish Life & Permanent are nothing
less than corporate corruption.

“Banking executives in both institutions must be investigated and those
who have and indeed still are behaving illegally should be charged and
subjected to due process.”

FAS REPORT

Meanwhile, a damning report on the FAS training agency, was released
today, which found the agency breached financial procedures at a heavy
cost to the taxpayer. The report was commissioned in the wake of
revelations that the agency had funded six-figure Florida vacations for
political cronies, including current Health Minister Mary Harney.

“It is worth remembering that it is Mary Harney in her former
ministerial role with responsibility for Trade, Enterprise and
Employment who presided over FAS for much of the period covered by the
report,” said Sinn Féin’s Arthur Morgan.

“And lets be honest, heads will have to roll in FAS but the buck
ultimately stops with the government who have overseen the budgets and
management of this state body.

“The golden circle culture embraced by Fianna Fail and the PDs since
the 1980s has fundamentally undermined Ireland’s economy, its banking
system and the delivery of state services over the last three decades
and we are all now paying the price for it,”

“The public anger that is growing on foot of every revelation of
institutionalised corruption on the government benches cannot be
underestimated. Today’s report is further evidence that government
needs to start looking from the top down rather than the bottom up when
it comes to public sector savings.”

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